Key Highlights
- Q2 operating earnings increased 16% year-over-year, reaching $12.98 billion
- Greg Abel authorized $4.5 billion in share repurchases throughout the second quarter
- Cash reserves declined to $365.5 billion from an all-time high of $397.4 billion
- Company turned net equity buyer after 14 consecutive quarters of net selling, purchasing nearly $20 billion in stocks
- A $10 billion position in Alphabet now ranks among Berkshire’s top five equity stakes
Berkshire Hathaway delivered impressive second-quarter results, with operating earnings advancing 16% to reach $12.98 billion compared to $11.16 billion in the same period last year. However, the headline story wasn’t just the earnings growthāit was CEO Greg Abel’s aggressive capital deployment strategy.
Berkshire Hathaway Inc., BRK-B
Abel deployed approximately $14.5 billion during the quarter through a combination of share repurchases and the previously announced $10 billion Alphabet stake, representing a notable departure in Berkshire’s approach to its massive cash reserves.
The company’s cash position decreased to $365.5 billion by quarter-end from an unprecedented $397.4 billion at the close of March. While this remains an enormous stockpile, the reduction demonstrates Abel’s readiness to deploy capital opportunistically.
During Q2, the conglomerate bought back $4.5 billion worth of its own shares, a dramatic increase from merely $235 million in the first quarter. The bulk of these repurchases occurred during June. Berkshire stock recently touched a fresh 52-week peak, potentially tempering additional buyback plans.
Berkshire’s BRK.B shares have advanced 3% for the year, underperforming the S&P 500’s 13% rally. Recent momentum has improved, however, with shares climbing 9% during the past three months.
Breaking down the operating segments, Manufacturing, service and retailing operations saw earnings leap 24% to $4.47 billion. Berkshire Hathaway Energy posted a robust 27% increase to $891 million. The BNSF railroad business expanded 6% to $1.56 billion.
Insurance operations presented a mixed picture. Underwriting profits declined 13% to $1.73 billion, while insurance investment income retreated 9% to $3.06 billion.
Historic Shift From Selling to Buying
After 14 consecutive quarters of being a net seller of stocks, Berkshire reversed course in Q2 with approximately $20 billion in net equity acquisitions. The quarterly report revealed that Berkshire purchased over $24 billion in commercial, industrial and other equity securities, though the specific holdings will remain undisclosed until subsequent filings.
Alphabet has now joined the elite group of Berkshire’s five largest stock holdings, standing alongside American Express, Apple, Bank of America and Coca-Cola. Buffett revealed to CNBC that he made the Google investment after discussions with Abel.
Net Earnings Show Dramatic Increase
Net earnings at Berkshire more than doubled to $25.67 billion, equivalent to $17,868.44 per Class A share, boosted by unrealized investment gains and comparison against a $3.8 billion write-down related to its Kraft Foods position in the prior year.
Buffett has consistently emphasized that investors should prioritize operating earnings over net profit figures, given the latter’s susceptibility to market fluctuations.
Abel assumed the CEO role from Buffett this past January when Buffett stepped down after an extraordinary six-decade tenure leading the company. Buffett continues serving as chairman of the board.
The company also finalized a $6.8 billion purchase of homebuilder Taylor Morrison, though this transaction closed in July and therefore doesn’t appear in second-quarter results.
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